U.S. Profits on AIG Turnaround Despite ‘Totally Archaic’ Bond Market

By Michael Aneiro

The Financial Times today offers up an interesting examination of the protracted process that led to the U.S. actually turning a $9.4 billion profit on its bailout investment in insurance giant AIG (AIG). The story, by Henny Sender, is worth reading in its entirety and defies simple summation, but one part bears mention for retail bond investors. The Fed deputized BlackRock to help sort through the complexities of AIG’s mortgage positions, and later to sell government-held AIG securities. BlackRock’s team came away with an impression that any investor who’s accustomed to the transparency of stocks and then tries dabbling in bonds can probably relate to:

Even to the big brains at BlackRock, the workings of the bond market were astonishing. “We found the bond market totally archaic,” says one member of the team. “It was dealers picking up the phone and saying: ‘Dude, what’s the price?’”